Best’s News & Research Service - June 14, 2024 03:24 PM (EDT)
AM Best Affirms Credit Ratings of AVLA Seguros de Crédito y Garantía S.A.
- June 14, 2024 03:24 PM (EDT)
//BestWire// - AM Best has affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb+” (Good) of AVLA Seguros de Crédito y Garantía S.A. (AVLA) (Chile). The outlook of these Credit Ratings (ratings) is stable.
These ratings reflect AVLA’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
AVLA began operations in Chile in 2013 as AVALCHILE, before changing its name to AVLA in 2016. The company is ultimately owned by AVLA Bermuda Holding Corp Ltd., domiciled in Bermuda. AVLA specializes in financial guarantees, credit insurance and surety; it ranks first in Chile in surety and financial guarantees and within the top three in credit insurance, based on market share.
AM Best considers AVLA’s business profile to be neutral. The company has been able to redefine its risk appetite successfully through adverse market conditions. In AM Best’s view, management’s capabilities remain key to adjusting its product offerings amid these evolving market conditions.
AM Best views the company’s operating performance as adequate; results have been favorable during the past three years. The company’s profitable results as of December 2023 were underpinned by revenue from fees for credit studies, tied to credit insurance policies. AM Best will continue to monitor AVLA’s results and underwriting quality as Chile’s economy evolves.
AVLA’s balance sheet strength assessment is strong given its solid capital base for the risks it undertakes, as reflected in its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). However, financial leverage at its holding company level limits AM Best’s view of the company’s balance sheet strength to the strong level, given the parent’s reliance on the company in terms of revenue and profits. This strong balance sheet strength assessment level also recognizes the willingness and proven history of capital contributions made by its shareholders to support AVLA’s growth, with the latest one taking place in 2023, which was equivalent to USD 1.9 million.
Negative rating actions could take place if AVLA’s market environment limits its operating performance or creates significant volatility in its underwriting metrics, especially if it affects the company’s capital position through continued negative bottom-line results. Positive rating actions could take place if AVLA is capable of showing a stable upward trend in risk-adjusted capitalization, underpinned by consistently positive bottom-line results. Positive rating actions could also take place if financial leverage at holding company levels shows continued improvement, releasing the pressure on holding company influence.
The methodology used in determining these ratings is Best’s Credit Rating Methodology (Version Jan. 18, 2024), which provides a comprehensive explanation of AM Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology .
Key insurance criteria reports utilized:
· Understanding Global BCAR (Version March 7, 2024)
· Available Capital and Insurance Holding Company Analysis (Version Jan. 18, 2024)
· Rating Surety Companies (Version April 25, 2024)
· Scoring and Assessing Innovation (Feb. 27, 2023)
View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, relevant sources of information and the frequency for updating ratings, please refer to Guide to Best’s Credit Ratings.
· Previous Rating Date: April 12, 2023
· Initial Rating Date: Dec. 5, 2018
· Date Range of Financial Data Used: Dec. 31, 2018-Dec. 31, 2023
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